As president Trump’s tariffs threaten to wreak havoc on sourcing sectors across Asia, economic diplomacy has escalated sharply. Negotiations are being rushed forward at breakneck speed across the region, driven by the sourcing of apparel, the “China+1” trend toward supply chain diversification, and the broader geopolitical volatility reshaping global supply chains.
Trump’s tariff threats have loomed large over the region. Myanmar faces 40-percent tariffs, and Cambodia (35 percent), Thailand (32 percent), Bangladesh (35 percent), and India (27 percent) also face high duty rates should they fail to secure trade deals with the U.S. government by Aug. 1. Indonesia saw its proposed tariff rate lowered from 35 percent to 19 percent following a series of concessions last week.
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“The need for [free trade agreements] is now a reality which cannot be wished away,” Mithileshwar Thakur, secretary general of the Apparel Export Promotion Council, told Sourcing Journal.
Not being a part of a free trade agreement, or FTA, runs a country the risk of being isolated and losing other trade advantages—”and in the process, getting priced out,” he added. “With 375 FTAs in force globally, almost every country has trade agreements with someone or the other, and negotiations are on with many more.”
India has stepped up its proactive trade talks with several countries. “The conclusion of trade agreement with U.K. earlier this year, the possibility of finalization of FTA talks with EU by the year-end and extreme likelihood of a quick trade deal with the U.S. are music to the ears of the apparel industry. These trade agreements will immensely benefit the Indian apparel industry by providing competitive edge vis-à-vis Bangladesh and Vietnam,” Thakur said. He added that India was also in “active discussions” with the U.S. to negotiate a multi-sector bilateral trade agreement (BTA) targeted for fall 2025, aiming to more than double U.S.‑India trade to $500 billion by 2030 under the moniker, “Mission 500.”
This is a point that the Indian minister of state for textiles, Pabitra Margherita, has reiterated often, citing the three major talks underway. “These are high‑value, quality‑conscious markets, and we are committed to equipping Indian exporters with the right strategy, standards, and compliance to seize these opportunities,” he said referring to the India‑U.K. Free Trade Agreement which was signed in May, and the ongoing negotiations with the EU and U.S.
The FTA talk is not mere political posturing; Indian apparel exporters, especially those from areas like Tirupur and Noida in the New Delhi Capital region expect order volumes to doublefrom U.K. within two years after the agreement goes into effect. Overall, India expects there to be an export growth of 20 percent to 30 percent to the U.K. over the next three years, with an annual value addition of $1.2 billion to $1.8 billion. It is expected to eliminate nearly all tariffs on Indian garments, textiles, leather and footwear exports to Britain—a move welcomed by industry.
But it’s not just India. The FTA wave has taken over the region. A photograph from Seoul at the end of March captured the moment: the trade ministers of South Korea and Japan, along with China’s commerce minister, stood in a cross-handshake pose symbolizing trilateral cooperation, calling for a FTA in the face of Trump’s tariffs. They emphasized the need to speed up such agreements and create a predictable trade and investment environment.
Each country has been pursuing its own path. On Tuesday, Vietnamese prime minister Pham Minh Chinh stressed the need for enhancing economic diplomacy at an event in Hanoi. “Economic diplomacy is a key pillar of diplomacy in the new era,” he observed. “We must connect with other economies more closely, inclusively, and comprehensively. There remains significant untapped potential. As high-level agreements have been reached, ambassadors, government agencies, ministries, provincial leaders, and industry associations must now realize them.”
He also highlighted the need to further diversify markets, products, and supply chains, promote trade facilitation and effectively leverage the 17 signed [FTAs] and sign additional FTAs that have already been under discussion, citing the need to cope with the risks caused by U.S. tariffs.
Although Vietnam successfully negotiated a reduction of its proposed tariffs from 47 percent to 20 percent—with a 40 percent levy on transshipped goods—it still faces challenges. Without new trade arrangements, the country may struggle to meet its ambitious 8-percent GDP growth target. Talks are now focusing on finalizing FTAs with India, Brazil, Pakistan, Egypt, countries in the Middle East, Africa, Latin America, Central Asia and Eastern Europe.
Indonesia, another major sourcing hub, is also pushing hard. It is hoping to conclude an FTA with the EU—its fourth-largest apparel market—this year. Such a deal would give it parity with Vietnam, which has enjoyed EU market access under the European Union-Vietnam Free Trade Agreement (EVFTA) since 2020. Indonesia already maintains 19 FTAs or Comprehensive Economic Partnership Agreements (CEPAs), including with ASEAN, China, Japan, South Korea, Australia, New Zealand, Hong Kong, Pakistan and Chile.
In June, Indonesia finalized an FTA with the Eurasian Economic Union (EAEU), which includes Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia—unlocking new trade and investment potential. “The government is actively engaged in trade talks with the Gulf Cooperation Council (GCC), Sri Lanka, the ASEAN-Canada FTA, Turkey and the Southern Common Market (Mercosur),” said Dyah Roro Esti Widya Putri, deputy minister of trade.
She emphasized that these moves are crucial “to face possible disruptions in supply chains or demand from markets affected by global conflicts and tariff barriers.” Last week, Indonesia also struck a deal with the U.S. to reduce its proposed tariff from 32 percent to 19 percent, contingent on Indonesian purchases of U.S. energy and aircraft.
Bangladesh, a powerhouse in apparel sourcing, is also embracing FTAs as a strategy.
“We’re positioning FTAs as lifeboats for our apparel sector as tariff preferences disappear,” said Tapan Kanti Ghosh, Bangladesh’s Commerce Secretary, in January. An FTA with Thailand has been under discussion as business leaders from both countries called for negotiations to expand market access across Southeast and Asia-Pacific regions. Bilateral trade between Bangladesh and Thailand stood at $1.13 billion in 2024. Negotiations with Thailand are expected to conclude this year.
While Bangladesh currently has no bilateral FTAs in force, it does have several regional and preferential trade agreements. It is actively negotiating multiple agreements to safeguard competitiveness ahead of losing its Least Developed Country (LDC) tariff benefits in 2026. Bangladesh is also in FTA and CEPA discussions with Vietnam, Singapore, India, China, Korea and Japan.
Preliminary talks for an FTA with the U.S. started in May with added fervor as president Trump’s announcement of a 37-percent tariff on Bangladesh in April shook the sector. A government official noted that this would considerably damage exports and although talks are ongoing, and Dhaka expects a revised rate of under 20 percent similar to Indonesia and Vietnam, the urgency to diversify can’t be emphasized enough.
Yet, FTAs don’t come without risks. As AEPC’s Thakur pointed out, “We have been extremely cautious and vigilant in recent FTA negotiations. Unfortunately, our experience with pre-2014 FTAs was not encouraging. There were duty inversions, widening trade-deficits, instances of ASEAN countries routing Chinese goods, issues in enforcement of rules of origin, etc.”
But this time, FTAs are being designed with broader and smarter frameworks.
“The new-generation FTAs being negotiated now have extensive coverage—not only tariff and non-tariff barriers but also services, investment, IP, sustainability, labor standards, digital trade, and ESG compliance. This allows enough scope to counterbalance concessions in areas of strategic interest. The current government is very aware of national priorities, and labor-intensive sectors are well protected,” said Thakur.
As a result of these overlapping talks and shifting alliances, the geopolitics of sourcing is becoming more complex.
“How these trade agreements will affect regional trade is not yet clear and is being rapidly assessed by all players,” said Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue in Dhaka. He reiterated that the next wave of FTAs goes well beyond tariff cuts and will inevitably raise issues around labor rights, transparency and economic conditions—especially as the U.S. negotiations get serious.
Still, with the Aug. 1 tariff deadline looming, economists in India, Vietnam, Bangladesh, Indonesia and other countries seem united on one point: FTAs may be the only path forward—they offer a window of stability amidst unsettling global volatility.
More than that, they offer the hope of maintaining the millions of jobs that support global apparel exports.
